Business Corporation - Legislation

Running Head: BUSINESS AND CORPORATION LAW 0
Australian Commercial Law
1/7/2020
Student’s Name

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Part A
Question 1
Issue
Whether an enforceable agreement existed between Tom and Wing? How the court would
determine the same.
Rules
A contract does not seem valid if a consideration does not exist between parties; nevertheless,
there is an exception of this rule under the common law of contract, which is promissory
estoppel. The doctrine of promissory estoppel states that in some of the situations, parties can
make a promise to each other without including an element of consideration and parties can rely
on such promise and act accordingly1. This doctrine can be treated as an exception of general
rule as a promise can be enforced through the same even when the requirements of a valid
contract are not fulfilled. Here this is necessary to inform that for the application of promissory
estoppel, some requirement needs to be satisfied.
The very first requirement demands that there must be a preexisting relationship between the
parties. This requirement was confirmed in the case of Combe v Combe2 Court of Appeal where
the husband promised his wife to make a certain payment but later on failed to do. Court held
1 Etiennelawyers.com, 5 Elements of Promissory Estoppel in Contract Law and Legal Agreements (etiennelawyers,
3 July, 2014) < https://etiennelawyers.com/5-elements-of-promissory-estoppel-in-contract-law-and-legal-
agreements/>.
2 Combe v Combe [1951] 2 KB 215 Court of Appeal

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that the wife could not rely on this promise as no legal relationship existed between the parties
i.e. husband and wife3. The second requirement states that the assumption needs to be induced by
the promisor him/herself. The third requirement demands that promisee must be relied on the
promise made by the promisor and must do the act accordingly. In other words, this can be stated
that there must be a change in the position of the promisee as given in the case of Alan v El
Nasr4.
The fourth requirement states that the promisor must be aware of the fact that the promisee relied
on the promise made by him/her (promisor). It means if the promisor does not know reliance on
the promisee then he cannot be held liable to fulfill the promise. Another requirement state that it
is a must for promisee to suffer from a loss. If no loss happens to promisee due to breach of
promise by promisor then there will be no question of the validity of promise or remedy. This
requirement believes that for allowing promissory estoppel, it should be inequitable for the
promisor to go back to his/her promise and promisee must be in a position of loss due to the
same. The last requirement of promissory estoppel demands that the promisor must act
unconscionably. Here unconscionability refers to against good conscience. If all the above-
mentioned situation is satisfied, then the court held the existence of a valid contract between the
parties.
Application
The case provided hereby highlight the matter of promissory estoppel as all the requirement of
the same are seems satisfied here. Firstly applying the decision of Combe v Combe, a legal
relationship between employer and employee existed between the parties. Secondly, Tom, being
an employer induced this promise by himself stating that next year, the salary of the wing would
3 Ewan McKendrick, Contract Law (Macmillan International Higher Education 2015)
4 Alan v El Nasr [1972] 2 WLR 800

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be revised to be double, and the same will be making an equal partner in the business. Relying on
this promise, Wing dropped his plan to leave the company and decided to continue with Tom
whereas Tom was aware of this fact. The issue of the case started when Tom denied increasing
salary of Wing unconscionably and due to the same, wing suffered from a loss as he missed the
opportunity Jerry's Computers.
Conclusion
As all the conditions of promissory estoppel are satisfied here, it is clear that a legally
enforceable contract existed between Wing and Tom irrespective of further consideration from
the side of Wing.
Question 2
Issue
What legal remedies, Wing can ask for if the case constituted a breach of contract by Tom.
Rules
Breach of contract leads to some obligations and rights to the parties. The common law of
contract stipulates many of the remedies that one can get if the other party breaches terms of the
contract. These remedies are equally applicable to the breach of promises made according to the
doctrine of promissory estoppel as the same also counts as an enforceable agreement. Damage is
one of the important remedies that compensate the innocent party for the loss of money out of a
contract breach. Under this remedy, the innocent party can recover the money lost from the liable
party. In the case of Addis v Gramophone5, it was given that the lead purpose of damages in
contract law is to put the parties in the same situation they would have been if the contract would
5 Addis v Gramophone [1909] AC 488

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have performed. Further as given in the case of Hadley v Baxendale6, under the remedy of
damages, the innocent party can recover only those losses which are a direct result of a breach of
contract.
Application
In the given case, Tom breached his promise made to Wing and therefore is liable for the breach
of contract. Wing suffers from loss of a job as he also rejected offers made by a competitor
named Jerry's Computers. In such a situation, Wing can recover the loss amount from Tom.
Nevertheless applying the decision of Hadley v Baxendale, he cannot recover the cost of printer
and scanner that he bought relying on the promise of Tom as this loss is too remote to breach of
promise.
Conclusion
The wing can ask damages for the loss of Job from Tom.
Part B
Issue
Considering the provisions of consumer guarantees and remedies mentioned under Australian
Consumer Law, what action Wing can bring against Lies IT Pty. Ltd.
Rules
As the name implies, Australian Consumer Law protects the consumer of this country from
unethical or deceptive business practices adopted by the provider of goods or services. This law
can be found under schedule 2 of the "Competition and Consumer Act 20107." This law provides
6 Hadley v Baxendale (1854) 9 Ex Ch 341
7 Competition and Consumer Act 2010

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some guarantees to the consumer with respect to the quality of products. Guarantees related to
goods are mentioned in the section from 51 to 59. Section 54 of ACL provides a guarantee of
acceptable quality. This section states that if a person supplies any goods in course or trade or
commerce then it becomes a guarantee that the same would fit for every purpose which is
commonly associated with that type of good and would be safe, durable and defect-free. Further
section 58 of this law states that when a person supply any goods to others and the sale is not a
result of suction then such then there is a guarantee that manufacturer of the goods would ensure
the availability of repair of goods or part thereof up to a reasonable time after the subjective sale.
The guarantee does not apply in those cases where at the time of supply the goods, the supplier
already mention to the consumer in writing that no repair facility would be available.
As these guarantees are confirmed by ACL, the same also provides some remedies in case of the
beach of these guarantees. As per section 260 of ACL, if the good is not of acceptable quality or
is defective then such failure if treated as a major failure8. Further subsection 3 of section 259
states that in case of happening of major failure, the consumer can reject the goods as well as can
ask for compensation for any reduction in the value of goods than the paid ones. For the breach
of section 58 of ACL, the remedies are mentioned under section 271 of ACL according to which
a consumer can take act action against the manufacturer of goods for damages.
Application
In the case presented hereby, Wing has purchased a new laser printer, computer, and scanner for
$10,000. The issue of the case started when the computer found defective and asked for the
repairment of the same. While selling the computer Lies IT Pty Ltd did not reserve any right of
8 Jenny Kojevnikov and Kathryn Edghill, Australia: Statutory Guarantees Under the Competition and Consumer
Act: A Can of Worms - Part 1 (Mondaq, 31 March 2012) <
http://www.mondaq.com/australia/x/170794/Consumer+Law/Statutory+Guarantees+Under+the+Competition+and+
Consumer+Act+A+Can+of+Worms+Part+1>.

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non-repairment, in fact, the same ensured a full guarantee of 12 months that too with a refund if
requested. To check the breach of guarantee, this is to state that Lies IT Pty Ltd breached the
guarantee mentioned under section 54 as the same has provided a defective computer, which was
not of acceptable quality. In addition to this, the company also breached the guarantee mentioned
under section 58 by not providing a repair facility to Wing.
Conclusion
As Lies IT Pty Ltd breached section 54 and 58, the same can reject the goods and can ask the
damages from the supplier for a reduction in the value of the computer. Further, being a
consumer faced breach of section 58 of ACL, the wing can take action against the manufacturer
of the computer for damages.
Part C
Issue
Can Wing has a right to take an action against Betty since she provided wrong advice that causes
loss to Wing. If yes then what are these rights under common law as well as state legislation.
Rules
Under the common law of tort, negligence is an important aspect according to which if a person
owes a duty of care to another then it becomes the responsibility of such person to behave as a
reasonable person. If the person who owes such duty fails to do so, it is considered as a breach of
duty. To establish negligence, some factors need to be there. The very first element is the duty of
care. It was given in the case of Donoghue v Stevenson9 [1932] UKHL 100, that every person is
9 Donoghue v Stevenson [1932] UKHL 100

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liable to his/her neighbor with respect to risk, which is reasonably foreseeable. The neighbor
refers to the person who does directly affect one's action. Another element has been confirmed in
the case of Vaughan v Menlove10, according to which there must be a breach of duty of care by
the defendant. The third element is damage to the claimant. It means the claimant must be
suffered from some loss due to breach of duty done by the defendant. The last requirement states
that the loss suffered by the claimant must be a direct result of the breach conducted by the
defendant. If all these conditions are satisfied then an innocent party can bring the case of
negligence. In the case of Esanda Finance Corporation V Peat Marwick Hungerfords11, it was
held that an accountant or auditor owes a duty of care to other where the same has reasonable
believes that the person is going to rely on the outcomes of their professional services12.
Similar to common law, legislation is also there which provides provisions related to the wrongs
committed by one person to another. Every state of Australia has its separate legislation on this
subject. In Queensland State, the Civil Liability Act 200313 is there. According to section 9 of
this act, a person who owes a duty of care to another seems liable for breach of such duty if three
of the following conditions are satisfied:-
 The risk was foreseeable
 The risk was significant
 Any reasonable person would have taken precaution under the existed situation14
10 Vaughan v Menlove (1837) 3, Bing. N.C. 467
11 Esanda Finance Corporation V Peat Marwick Hungerfords (1997) 188 CLR 241
12 Doylesarbitrationlawyers.com, Esanda Finance Corporation V Peat Marwick Hungerfords
(Doylesarbitrationlawyers) < http://doylesarbitrationlawyers.com/esanda-finance-corporation-v-peat-marwick-
hungerfords/>.
13 Civil Liability Act 2003 (Qld)
14 Legislation.qld.gov.au, Civil Liability Act 2003 (Queensland Government, 1 July 2016) <
https://www.legislation.qld.gov.au/view/pdf/inforce/current/act-2003-016>.

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Therefore a person can take an action against a liable party under the subjective act as well once
the breach of duty and other conditions are established.
Application
In the case given hereby, Betty was working in the professional capacity and was aware that
Wing was to be affected directly by any of the advice provided by him (Betty). Applying the
provisions of Donoghue v Stevenson and Esanda Finance Corporation V Peat Marwick
Hungerfords, Betty owed a duty of care to Wing. By providing wrong advice, he breached this
duty under common law. Further, the duty also seems to be breached under state legislation as
this risk was major as well as was foreseeable. Betty had an idea about the loss that Wing was
about to bear due to his wrong advice yet he failed to follow the duty like a reasonable person.
The same has happened afterward where Wing had to close down his business considering the
poor financial condition. The loss that happened to him was a result of a misreading of financial
statements by Betty.
Conclusion
As all the conditions of a negligence claim in addition to breach of duty under common law as
well as legislation are fulfilled here, Wing can take action against Betty under both of these laws.

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Bibliography
Books/Journals
McKendrick, Ewan, Contract Law (Macmillan International Higher Education ,2015)
Cases
Addis v Gramophone [1909] AC 488
Alan v El Nasr [1972] 2 WLR 800
Combe v Combe [1951] 2 KB 215 Court of Appeal
Competition and Consumer Act 2010
Donoghue v Stevenson [1932] UKHL 100
Hadley v Baxendale (1854) 9 Ex Ch 341
Vaughan v Menlove (1837) 3, Bing. N.C. 467
Legislation
Civil Liability Act 2003
Civil Liability Act 2003 (Qld)
Other Resources
Doylesarbitrationlawyers.com, Esanda Finance Corporation V Peat Marwick Hungerfords
(Doylesarbitrationlawyers) < http://doylesarbitrationlawyers.com/esanda-finance-corporation-v-

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peat-marwick-hungerfords/>.Esanda Finance Corporation V Peat Marwick Hungerfords (1997)
188 CLR 241
Etiennelawyers.com, 5 Elements of Promissory Estoppel in Contract Law and Legal Agreements
(etiennelawyers, 3 July, 2014) < https://etiennelawyers.com/5-elements-of-promissory-estoppel-
in-contract-law-and-legal-agreements/>.
Kojevniko, Jenny and Kathryn Edghill, Australia: Statutory Guarantees Under the Competition
and Consumer Act: A Can of Worms - Part 1 (Mondaq, 31 March 2012) <
http://www.mondaq.com/australia/x/170794/Consumer+Law/Statutory+Guarantees+Under+the+
Competition+and+Consumer+Act+A+Can+of+Worms+Part+1>.
legislation.qld.gov.au, Civil Liability Act 2003 (Queensland Government, 1 July 2016) <
https://www.legislation.qld.gov.au/view/pdf/inforce/current/act-2003-016>.